2019 (9) TMI 1187 - AT - Service Tax

Whether the Appellant is liable to pay interest under Section 75 of the Finance Act, 1994? - The Appellant prior to the issue of show cause notice, on being pointed by the audit, did not dispute and paid the service tax. HELD THAT - No case of mis-conduct is made out against the Appellant and as such the SCN invoking the extended of limitation is not maintainable - the demand of interest under section 75 of Finance Act, 1994 and also the penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Liability to pay interest under Section 75 of the Finance Act, 1994; Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994; Extended period of limitation for show cause notice.

Liability to pay interest under Section 75 of the Finance Act, 1994:
The appeal revolved around determining whether the Appellant was liable to pay interest under Section 75 of the Finance Act, 1994. The Appellant, engaged in a Franchise Service, had paid Service Tax on their sales/turnover but did not deposit the interest and penalty. The Appellant contended that the situation was revenue-neutral and hence not liable for interest and penalty. The show cause notice invoked an extended period of limitation and proposed to demand the tax amount along with interest and penalty. The Appellant, prior to the show cause notice, paid the calculated service tax but disputed the interest and penalty. The Appellant argued that they were not liable for interest and penalty due to the revenue-neutral nature of the situation.

Imposition of penalty under Sections 76, 77, and 78 of the Finance Act, 1994:
The show cause notice was adjudicated, confirming the demand along with interest and imposing penalties under Sections 76, 77(1)(a), 77(2), and 78 of the Finance Act, 1994. However, the Commissioner (Appeals) observed that since the Appellant had deposited the tax and taken credit, they were not liable to pay interest. Regarding the penalty, the Commissioner (Appeals) noted that the Appellant had sought clarification from the Department about the taxability of the "Master Franchise Fee" in 2012, informing the Department about the payment. The Commissioner (Appeals) found no suppression of facts or misconduct, setting aside the penalties under Sections 77 and 78 of the Act.

Extended period of limitation for show cause notice:
The Appellant, aggrieved by the decision, approached the Tribunal, arguing that since there was no misconduct or suppression of facts, the extended period of limitation was not applicable, rendering the show cause notice not maintainable. The Tribunal, after considering the contentions, found that no misconduct was established against the Appellant, leading to the conclusion that the show cause notice invoking the extended period of limitation was not maintainable. Consequently, the Tribunal set aside the demand for interest under Section 75 of the Finance Act, 1994, and the penalties, while upholding the tax amount deposited by the Appellant. The appeal was allowed in favor of the Appellant.